Deck 10: Public Goods, Common Resources and Merit Goods

Question 1

If the local government sells apples at a roadside stand, the apples are public goods because they are provided by the government.

Answer 1

False

Question 2

If one person's consumption of a good diminishes other people's use of the good, the good is said to be

A) rival.
B) a good produced by a natural monopoly.
C) a common resource.
D) excludable.

Answer 2

rival.

Question 3

A common resource is neither rival nor excludable.

Answer 3

False

Question 4

If someone owned the property rights to clean air, that person could charge for the use of the clean air in a market for clean air and, thus, air pollution could be reduced to the optimal level.

Question 5

Which of the following would be the best example of a public good?

A) A chocolate bar.
B) A painting by Picasso.
C) A beautiful sunset.
D) A crowded beach.

Question 6

A common resource is

A) not rival but excludable.
B) both rival and excludable.
C) rival but not excludable.
D) neither rival nor excludable.

Question 7

Which of the following is NOT a characteristic of a public good?

A) It requires resources to produce.
B) It is not diminished or depreciated as additional people consume the good.
C) Its benefits cannot be withheld from anyone.
D) It is a free good with zero opportunity cost.

Question 8

Merit goods are goods that governments feel without subsidies or extra taxes would be under- or over-consumed.

Question 9

A merit good cannot be provided by the private sector.

Question 10

A club good produced by a natural monopoly is

A) rival but not excludable.
B) neither rival nor excludable.
C) not rival but excludable.
D) both rival and excludable.

Question 11

Common resources are overused because common resources are free to the consumer.

Question 12

Club goods are excludable and rival in consumption.

Question 13

Private markets have difficulty providing public goods due to the free rider problem.

Question 14

For private goods allocated in markets,

A) prices guide the decisions of buyers and sellers, and these decisions lead to an efficient allocation of resources.
B) prices guide the decisions of buyers and sellers, and these decisions lead to an inefficient allocation of resources.
C) the government guides the decisions of buyers and sellers, and these decisions lead to an efficient allocation of resources.
D) the government guides the decisions of buyers and sellers, and these decisions lead to an inefficient allocation of resources.

Question 15

A public good is

A) neither rival nor excludable.
B) rival but not excludable.
C) both rival and excludable.
D) not rival but excludable.

Question 16

A private good is

A) rival but not excludable.
B) not rival but excludable.
C) both rival and excludable.
D) neither rival nor excludable.

Question 17

Public goods are difficult for a private market to provide due to

A) the rivalness problem.
B) the public goods problem.
C) the Tragedy of the Commons.
D) the free-rider problem.

Question 18

To achieve the optimal provision of public goods the

A) market should be allowed to find its equilibrium without government intervention.
B) government must limit the provision of the goods.
C) government must tax producers of these goods.
D) government must either provide the goods or subsidise their production.

Question 19

A public good is both rival and excludable.

Question 20

Common resources are related to negative externalities because consumers of common resources ignore the negative impact of their consumption on other consumers of the common resource.

Question 21

The three most important public goods are national defence, basic research, and

A) opening stores.
B) fighting poverty.
C) digital commerce.
D) sports.

Question 22

Imagine a 200 hectare park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. Of course, when the weather is nice it is difficult to find parking, and the rubbish bins overflow with food wrappers on summer afternoons. Otherwise, it is a great place. The park is a common resource because

A) when rubbish bins overflow, a negative externality becomes a positive externality.
B) it is not fenced to control access.
C) if too many people use it, one person's use can prevent others from using it.
D) you have to drive to get there and the car is a private good.

Question 23

A free rider is a person who

A) receives the benefit of a good but avoids paying for it.
B) pays for a good but fails to receive any benefit from the good.
C) fails to produce goods but is allowed to consume goods.
D) produces a good but fails to receive payment for the good.

Question 24

The free rider problem

A) forces supply of a public good to exceed demand.
B) allows more people to pay for the public good than if it were a private good.
C) encourages overuse of a good that is freely available.
D) holds the equilibrium quantity of a public good below the economically efficient level.

Question 25

A person who regularly watches SABC television programmes in South Africa but fails to pay their TV licence fee is known as

A) excess baggage.
B) a free rider.
C) a costly rider.
D) a common resource.
E) an unwelcome rider.

Question 26

The Tragedy of the Commons is a parable that illustrates why

A) common resources are over consumed.
B) public goods are under produced.
C) private goods are under consumed.
D) natural monopolies overproduce goods.

Question 27

A television signal is an example of

A) a private good.
B) a non-rival good.
C) a social good.
D) a normal good.

Question 28

A positive externality affects market efficiency in a manner similar to a

A) rival good.
B) public good.
C) private good.
D) common resource.

Question 29

Suppose each of 20 neighbours on a street values street repairs at R3 000. The cost of the street repair is R40 000. Which of the following statements is true?

A) It is efficient for the government to tax the residents R2 000 each and repair the road.
B) It is efficient for each neighbour to pay R3 000 to repair the section of street in front of his/her home.
C) None of these answers are true.
D) It is not efficient to have the street repaired.

Question 30

When markets fail to allocate resources efficiently, the ultimate source of the problem is usually

A) government regulation.
B) that prices are not low enough so firms overproduce.
C) that prices are not high enough so people over consume.
D) that property rights have not been well established.

Question 31

Government policy can potentially raise economic well-being

A) in all markets for goods and services.
B) in economic models, but not in reality.
C) when a good does not have a price attached to it.
D) never.

Question 32

Which of the following is an example of a common resource?

A) a fireworks display
B) national defence
C) iron ore
D) a national park

Question 33

People have little incentive to produce a public good because

A) the social benefit is less than the private benefit.
B) the social benefit is less than the social cost.
C) there is a free rider problem.
D) there is a Tragedy of the Commons.

Question 34

Music is an example of

A) a private good.
B) a social good.
C) a non-rival good.
D) a common good.

Question 35

Governments can improve market outcomes for

A) public goods but not common resources.
B) common resources but not public goods.
C) both public goods and common resources.
D) neither public goods nor common resources.

Question 36

Which of the following is an example of a public good?

A) hot dogs at a picnic
B) whales in the ocean
C) national defence
D) apples on a tree in a public park

Question 37

Which of the following are potential solutions to the problem of air pollution?

A) Grant rights of the clean air to citizens so that firms must purchase the right to pollute.
B) Auction off pollution permits.
C) Regulate the amount of pollutants that firms can put in the air.
D) All of these answers

Question 38

When governments employ a cost-benefit analysis using the results from a questionnaire to help them decide whether to provide a public good, measuring benefits is difficult because

A) there are no benefits to the public since a public good is not excludable.
B) the benefits are infinite because a public good is not rival and an infinite amount of people can consume it at the same time.
C) one can never place a value on human life or the environment.
D) respondents to questionnaires have little incentive to tell the truth.

Question 39

An overcrowded beach is an example of

A) a positive externality.
B) a Tragedy of the Commons.
C) environmentally inefficient allocation.
D) economically unsound allocation.

Question 40

A negative externality affects market efficiency in a manner similar to

A) an excludable good.
B) a private good.
C) a common resource.
D) a public good.

Question 41

The creation of knowledge is a public good. Because knowledge is a public good, profit-seeking firms tend to free-ride on the knowledge created by others and, as a result, devote too few resources to the creation of knowledge. How do governments correct for this apparent market failure?

Question 42

What are the private and social costs associated with over-consumption of alcohol and what options are available for the government to correct this?

Question 43

___________ is a survey-based approach that aims to place a monetary value on a good through getting respondents to state a preference and a willingness to pay.

A) Contingent valuation method
B) Conjoint analysis
C) Marketing methodology
D) Value derived method

Question 44

What is meant by goods that are excludable and rival?

Question 45

Which is not a private benefit from education?

A) Better skills and knowledge.
B) More productive workforce.
C) Better job prospects.
D) Higher salaries in the long term.

Question 46

What are the characteristics of common resources and why do governments seek to limit the use of common resources?

Question 47

The government often intervenes when private markets fail to provide an optimal level of certain goods and services. For example, the government imposes an excise tax on fuel to account for the negative externality that drivers impose on one another. Why might the private market not reach the socially optimal level of traffic without the help of government?

Question 48

Which of the following could be a merit good?

A) Education.
B) National defence.
C) Police service.
D) Flood control schemes.

Question 49

De-merit goods

A) are over consumed in the view of the government.
B) are harmful to individual consumer.
C) have negative externalities.
D) can be all of the above.

Question 50

Place each of the following in the correct location in the table.

a. Congested toll roads
b. Knowledge
c. Fish in the ocean
d. National defence
e. Congested non-toll roads
f. DSTV
g. The environment
h. Fire protection
i. Chocolate
j. Uncongested toll roads
k. Clothing
l. Uncongested non-toll roads

Question 51

A congested toll road is

A) a good produced by a natural monopoly.
B) a private good.
C) a public good.
D) a common resource.

Question 52

Which merit good is likely to be under consumed when left to the market mechanism?

A) Tobacco
B) Alcohol
C) Education
D) Heroin

Question 53

Some advocates of anti-poverty programs claim that fighting poverty is a public good. Describe why government intervention may be necessary to reduce poverty.

Question 54

Why might merit goods be under-consumed if left to the market and so what can be done to correct this problem?

Question 55

What are the characteristics of public goods, why is there a free rider associated with public goods and what determines whether the government should make provision for public goods?

Question 56

If a person can be prevented from using a good, the good is said to be

A) excludable.
B) a common resource.
C) a public good.
D) rival.

Question 57

Which de-merit good is likely to be over consumed when left to the market mechanism?

A) Education.
B) Health care.
C) Museum attendance.
D) Tobacco.

Question 58

Why do wild salmon populations face the threat of extinction while goldfish populations are in no such danger?